It’s official, French shipping company CMA CGM, the third largest ocean container shipping line has agreed to buy Singapore’s Neptune Orient Lines Ltd. (NOL) for approximately $2.4 billion in cash. This deal has been speculated for several weeks as financially troubled NOL sought out a buyer. The offer is reported as being a 49 percent premium over NOL’s closing stock price on July 16, the last trading day after the line declared that it was seeking strategic options.
According to The Wall Street Journal, if approved by regulators, this deal will rank as the biggest shipping consolidation since 2005 when A.P. Moeller-Maersk acquired P&O Nedloyd for $3 billion. Both CMA CGM and Maersk were in initial talks to acquire NOL.
If approved, the consolidation will bring together a fleet of 563 vessels with combined revenue of approximately $22 billion. If further provides CMA CGM a stronger presence in trans-Pacific and intra-Asia shipping support and could allow CMA to leverage NOL’s long-term shipping contracts with the U.S. government.
According to the WSJ, the merged entity would further represent an 11.4 percent market share of global container capacity, up from CMA’s current 8.8 percent share. Industry leader Maersk Line currently controls 14.7 percent, while Mediterranean Shipping Line (MSC) controls 13.3 percent.
Today’s news comes in addition to a previous announcement that China’s two state-owned shipping lines, China Ocean Shipping Company (Cosco) and China Shipping Group are in advanced talks to merge.
Supply Chain Matters will be unveiling or 2016 Predictions for Industry and Global Supply Chains over the next few days. One of our predictions will call for continued turbulence in global transportation, especially within the ocean container industry. If approved by regulators, the implication of the CMA and NOL merger is that smaller operators have no choice but to seek out larger suitors or dramatically reduce operating costs and capacity.